Proposed agency offers savings

March 13, 2012

Defense officials have asked Congress to approve a new governance structure for the military health care system that, like higher TRICARE fees, would help to curb what, for a decade, have been runaway medical costs, officials explained.

The centerpiece of the plan is to elevate the TRICARE Management Activity to a more powerful Defense Health Agency (DHA), with new authorities to use more effectively the military’s direct care system and to manage more carefully purchased care through TRICARE support contractors.

The DHA also would impose new business processes and appoint market managers in areas with multi-service medical facilities so operations are streamlined. The agency also would reduce redundancies across the separate medical commands of the Army, Navy and Air Force by combining where possible functions for purchasing, logistics and information technology.

Service medical commands would continue to be run separately, a concession to those who see them providing unique strengths and expertise. But to critics, including some lawmakers, who still want a joint medical command running military healthcare, as numerous studies have endorsed, the DHA should be seen as a reasonable interim step, said Dr. Jonathan Woodson, assistant secretary of defense for health affairs.

“The Defense Health Agency will be an important pillar of any unified health command if that, indeed, were considered down the line,” Woodson explained to several journalists during a briefing on the proposed structure.

The strongest reason to keep Army, Navy and Air Force medical commands, led by separate surgeons general, is operational medicine, Woodson said. The Navy is trained to deliver care to units afloat and to deployed Marines, the Air Force has expertise in aerial platforms and Army docs are trained to deliver medical ground support in combat theaters.

“The whole idea is not to throw the baby out with the bathwater. To design a system that creates…the best quality in health care (and) access, but preserves the unique features that individual service cultures bring to the fight,” Woodson said.

A DHA, he added, will “allow us to get maximum effort and efficiency of shared services, and really creates the 70-percent solution, without having to tear the services apart in reorganizing…a cumbersome and probably more expensive” command, and doing so in wartime.

A Pentagon task force established last June drafted the new governance plan. But Congress temporarily blocked it, demanding a report from the department that describes every option studied, the potential impact on readiness of each, and their projected cost savings.

The DHA eyed would be led by a three-star officer and would report to Woodson, the department’s most senior health official. The surgeons general would focus more heavily on operational medicine and less on the garrison care and insurance benefit for troops, retirees and their families.

The savings from creating the DHA would be modest, about $50 million a year through reduced staffing, shaved off of a healthcare budget that will top $53 billion this year.

But more substantial savings — in the billions of dollars annually — are expected once the DHA is operating to eliminate waste and can impose new business processes on military hospitals and clinics, and on purchased care contracts that govern TRICARE civilian networks.